On June 26, the White House announced three appointments to the the Financial Oversight and Management Board (FOMB) for Puerto Rico, extending the terms of two current members and bringing one new member on board:
- Former bankruptcy judge Arthur J. Gonzalez will serve a third term.
- Educator and former university president Betty A. Rosa will serve for a second term.
- Luis Ubiñas, a businessman with experience in government and non-profit sectors, will be a new member of the board.
Also on June 26, David Skeel, Chair of the FOMB, put the Board and public on notice that he will not seek a third term, explaining “after 8 years as a member of the FOMB I decided I will not stand for a third term. I am proud of what we have accomplished. We must continue our work to complete Puerto Rico’s recovery.” Skeel intends to step down as soon as the president appoints a replacement for him.
The seven members of the FOMB work as volunteers, receiving no pay or other compensation. All seven members are appointed by the President of the United States. The members serve three-year terms.
A Complicated Beginning
Leading up to 2016, the Puerto Rican government experienced significant difficulties in paying its debts. When other U.S. entities experienced similar challenges, they were able to turn to Chapter 9 of the Federal Bankruptcy Code for relief. Unfortunately, Chapter 9 excludes Puerto Rico from the definition of “State” for eligibility purposes, rendering this form of relief out of reach for the U.S. territory.
As the Congressional Research Service (CRS) explains in a briefing document, “Puerto Rico tried to surmount this obstacle by passing its own statute in 2014 to create a bankruptcy-like debt restructuring procedure for its public utilities,” but the Supreme Court ruled in 2016 that “federal law preempted that statute, leaving Puerto Rico with no valid avenue for debt relief.”
Congress responded in 2016 by invoking the Territorial Clause of Article IV of the U.S. Constitution (also known as the Territories Clause)—which empowers Congress to “make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States”—to enact the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) and establish the Board. PROMESA grants the Board various powers and responsibilities to provide a method for Puerto Rico “to achieve fiscal responsibility and access to the capital markets.”
A Controversial Group
The FOMB has been mired in controversy from the beginning. It has a great deal of power over the elected government of Puerto Rico, an unusual arrangement complicated further by Puerto Rico’s status as a U.S. territory and its related lack of a voice in the federal decision making that governs the people of Puerto Rico.
Puerto Rican governors have had disagreements with the board over specific expenditures. Residents of Puerto Rico have also protested against what they perceive as austerity measured harmful to people living on the Island and favorable to creditors on the mainland.
Some members of Congress, including Rep. Ritchie Torres (D-NY), have called for an end to the FOMB. Governor Pierluisi has also expressed eagerness to see the board complete its work.
The board sees its progress quite differently. In his statement, Chairman David Skeel stated, “When the Oversight Board was formed, Puerto Rico was on the brink of collapse, with no path to reduce its crushing debt. PROMESA opened a legal path, a fair path. It also opened a path for reforms that will usher in a better future. I am proud of what we have accomplished together in cutting the debt and stabilizing Puerto Rico’s finances…I know the Oversight Board will achieve PROMESA’s mandate of ensuring long-term fiscal responsibility, restoring sustainable economic growth, and providing the people of Puerto Rico with the opportunities they deserve…Dedication, a highly skilled board and staff, and the belief that we couldn’t afford to fail got us to where we are today: a stable budget and a massively reduced debt.”
